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Harris v. C & C Developers

A-981-01T5 (N.J. Super. App. Div. 2003) (Unpublished)

CONTRACTORS; NEW HOME WARRANTY—If a new home warranty arbitrator determines that an alleged defect is not covered by the warranty, the owner is not then barred from pursuing a remedy in court as a breach of contract claim.

Following construction of a new house, the buyer claimed that there were defects in the construction and pursued its remedies “administratively under the New Home Warranty and Builders’ Registration Act (the Act) as well as in the courts by way of a breach of contract and consumer fraud action.” One of the claims rejected by the Bureau of Homeowner Protection concerned moisture on a basement wall. The rejection was stated: “At the time of this inspection the homeowner stated that there was no actual tricking [trickling] of water on the wall, only dampness. Dampness in basement walls is not a deficiency. No warranty defect was observed. ... Claim Denied.” When the matter reached trial, an issue concerning the buyer’s election of remedy arose. The Act states, in part, that “initiation of procedures to enforce a remedy [pursuant to the Warranty Act] shall constitute an election which shall bar the owner from all other remedies.” The Appellate Division held that this language should not be mechanically applied, saying: “It does not mean that if a homeowner presents a defect for administrative resolution and that defect is found not to be included within the Warranty Act’s class of defects, that the homeowner is thereby barred from filing suit as he should have done in the first instance.” The lower court concluded that the basement wall issue “had been adjudicated and denied on the merit[s]” in the administrative proceeding. The Appellate Division disagreed, interpreting the administrative decision to constitute only “a statement that the alleged defect [was] not serious enough to be covered by warranty.” It did not constitute a conclusion that the construction was defect free or that the dampness did not exist. Even if a damp wall was not covered by the warranty, the buyer was entitled to seek enforcement of the contract provision that “all work will be of good quality, free from faults and defects… .” Consequently, the Court saw no reason why the buyer could not proceed with its contract claim.

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